Forex Accounts Explained
June 5th, 2009
Develop your own Forex Trading System. Good money management is the key to your long term success in currency trading. Many people ignore this aspect of trading at their own peril. Trading discipline means using a trading system that uses good money management rules to avoid using emotions in making trading decisions..Discover L.M.T Forex Formula.
One of the worst blunders that trades can make is to try to trade without sufficient capital. This does not mean that you should have a lot of money before you start trading; it only means that you need to have enough capital in your account to take advantage of the movements in the markets. Low capital increases your chances of getting blown out.
The minimum amount required to open a standard account with many forex brokers is $2000. You can start with $2000. However, it is recommended by most of the professional traders that you should start with at least $5000 to get good results. A trader with limited capital is always a worried traders always looking to minimize losses beyond the point of realistic trading. Never ever trade live without practicing on the demo account for a few months.
A regular account or a standard account often also called 100k account lets you trade a $100,000 standard lot with a $1000 deposit. This $1000 is kept as the margin by the broker. This is a 1% margin.
You can change the margin account to whatever you feel comfortable with. When you open an account with the broker, you must determine what the default margin is. If you start at 2% margin, then it will cost you $2000 to trade one standard lot.
You can get a leverage of up to 200% in most of the standard accounts. Using 200% leverage means trading $200,000 with a $1000 deposit. Too much leverage is dangerous. Don’t use more than 4% leverage while trading in the beginning.
It’s not that leverage is bad. It is a double edged sword that cuts both ways. It increases your profit but at the same time wipes you out in case of a slight miscalculation on your part. It’s just that you need to understand and learn how to use it. You can only do so with practice. With practice and more experience, you can increase the level of leverage in your trading.
The mini account was developed to accommodate investors who were looking for diversification of their stocks portfolios. You can open a mini account with a deposit of $300. This small dollar requirement allows many investors to participate in the forex markets who were previously unable to do so.
On a mini account, you have different lot sizes as compared to the standard account. One lot on a mini account means $10,000. You only need $50 to control a mini lot of $10,000. A pip size on the mini account is equal to $1 instead of $10 as on a standard lot.
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